SHARES of Chinese-language newspaper publisher Sin Chew Media Corp Bhd (SCMC) are expected to trade above their initial public offer (IPO) price of RM2.25 when the company lists on Bursa Malaysia on Oct 18.
Two research reports - by Thong & Kay Hian Securities and RHB Research - have set a price target of RM3.10 and RM2.72 respectively for SCMC, which publishes the Chinese-language Sin Chew Daily and Guang Ming Daily.
Thong & Kay Hian said SCMC was poised to capture the additional advertising expenditure (adex) in the Chinese newspaper segment via Sin Chew Daily and Guang Ming Daily, which currently have a combined market share of 52.9% in that segment.
“We expect SCMC's adex to trend higher with a growth rate of 15% in FY05 and 12% in FY06 compared with the sector's 14% and 10% respectively.
Higher adex revenue is expected to come from Guang Ming Daily, whose advertisements take up only 30% of the company's total paging, versus 40% for Sin Chew Daily,'' Thong & Kay Hian said.
It also said SCMC commanded higher adex rates than its competitors due to its strong presence and market share. “The ability to command higher adex rates can directly boost SCMC's revenue and earnings,'' the report said.
Thong & Kay Hian has forecast SCMC’s net profit to grow by 25.5% with earnings per share (EPS) of 19 sen for FY05, and 15.1% and 21.9 sen respectively for FY06.
“We like SCMC for its dominance in the Chinese newspaper segment and strong earnings growth. Based on an IPO price of RM2.25, SCMC is valued at 11.8 times and 10.4 times FY05 and FY06 price over earnings (PE).
RHB Research said Sin Chew Daily was well known for its balanced mix of commercial and cultural insights, and was well regarded by its readers as providing accurate and timely news and commentaries on world events.
It said according to media research agency Nielsen Media Research, Sin Chew Daily and Guang Ming Daily currently had readership of 1.1 million and 400,000 respectively.
The agency also estimated the daily circulation for Sin Chew Daily and Guang Ming Daily at 344,000 and 134,000 respectively, which translates into readership per copy of about 3.2 times.